Protectionismcan be viewed as a type of economic policy that restricts/restrains tradebetween countries through tariffs, quotas, subsidies, tax cuts, exchange rateinterventions, legislations and other government initiatives.
The policy isused to make sure that domestic businesses, producers, workers and jobs areinsulated from foreign competition. The policy is common to both developed anddeveloping nations. In recent years the more and more countries have been adoptingstances in-line with protectionist tendencies.The opponents of protectionistpolicies argue that the so called merits of the policy are limited and subjectto debate. They argue that in the long-run the trade restrictions hurts thepeople it aims to protect by impeding economic growth and drive up prices. Itleads to market distortion and loss of efficiency. There are considerabledeadweight losses causing a reduction in consumer and producer surplus.
The negative effect is felt by people of thecountry adopting protectionism as well as in the countries being protectedagainst. Increased protectionist policies lead to an overall lower volume ofworld trade.The advocates of protectionism argue that absence of it leads tounemployment and low wages in developed countries. Since developed countrieshave higher cost of business as compared to low wage countries so in case offree trade there is a loss of jobs in the developed countries since they cannotcompete due to labour costs. Their argument essentially boils down to the factthat complete liberalization of trade (free trade) would result in large and unequallydistributed profit & loss as well as considerable dislocation of worker insectors competing internationally. Ingeneral, economists are in consensus that the cost of protectionism faroutstrips its advantages and free trade is the way forward.
However, in recentyears there has been a rise of protectionist sentiments. With the election of aconservative president in the US (Donald Trump) there has been a pronounced shiftin US policy that has far reaching consequences for developing nations.Specific policies such revamping of visa system and pulling out of trade blocssuch as TPP shows that Mr. Trump plans to deliver on his campaign promise ofbringing back American jobs and insulating the US economy. Similar sentimentsare there in UK as well which voted to exit the EU, which was another heavyblow for free trade.
In this paper we look at what recenttrends in protectionism mean for the countries of South East Asia. Thesecountries have generally relied on export of goods/services to drive theireconomies. Many of them don’t have the domestic markets that can support thesupport the level of production making international trade a necessity forthem. We will look at effect these tradepolicies have on businesses i.
e. what doors have closed which ones are stillopen. We will also discuss in detail the possibility of increased regionalco-operation to counter the effects of protectionism in the west.